President Obama: we need a global demand treaty

February 15, 2013

The global situation continues on its sorry downward spiral as the European Union reports its latest contraction. Japan, meanwhile, is desperate to reverse its deflation and the United States remains mired in stagnation. Similar or worse conditions exist everywhere else.

The fundamental global problem is self evidently one of purchasing power, in economic speak – demand, and it’s been a constant theme for a very long time. So, here’s a humble suggestion, Mr. President: think in terms of a new global treaty. Your focus internationally on free trade agreements is ridiculously anachronistic and a complete waste of time. Expanded trade agreements with the Pacific, Europe, and elsewhere may be good or bad for the average person, no need to quibble, but they quite clearly aren’t remotely the central problem today. They’re little more, in fact, than trivial diversions. Put them on the back burner where they belong and work instead on moving to a world in which purchasing power is guaranteed for all. We need a global demand agreement.

Governments and central banks are experimenting today with very unorthodox ideas that have tremendous potential. The Fed has been printing money for some time now although it’s sadly directed mostly at bailing out banks and creditors. The Bank of England has done the same, as has even the European Central Bank. Japan is very publicly expanding its creation of yen in an effort to jumpstart its economy. We find rising support for monetary creation from very conservative sources, as we saw yesterday from Martin Wolf in the Financial Times. The ideas are basic – use the power of collective action and direct monetary creation to assure prosperity. With the growing central bank utilization of money creation coupled with rising support, now would seem the time to finally move toward a real global prosperity. If not now, when?

The US remains the global hegemon and has a deep responsibility of leadership here, given that it created the neoliberal world that’s sinking populations everywhere including those within its own borders. So why not propose a new global demand treaty to Japan, the European nations, and the rest of the world which guarantees stable prosperity? Of course there will be strong objections in some quarters but the proposition should command overwhelming popular support.

The ideas are well known and are not rocket science. Currency wars, speculative attacks, austerity, trade deficit restrictions, rising debt, unemployment, poverty, insecurity and the like are all inevitable outgrowths of our current paradigm, they aren’t forces of nature. What we need now is a currency cooperation treaty that puts the welfare of people far above that of consolidated finance.